COMMUNIQUÉ DE PRESSE
par WICKES GROUP PLC
WICKES GROUP PLC: Full Year Results
WICKES GROUP PLC (WIX) Wickes Group plc - Full Year Results 2022 for the 52 week period to 31 December 2022 Record sales and further market share gains; well-placed to continue to outperform the market Financial Highlights
Strategic Highlights
Capital Allocation Policy
Current Trading & Outlook In the first 11 weeks of 2023 trading has been in line with our expectations. Core sales are moderately behind the same period last year, with Trade sales in growth and DIY continues to normalise. In DIFM, delivered sales are slightly ahead year on year due to the elevated order book; ordered sales are in line with the same period in 2022. Whilst we are mindful of the macroeconomic backdrop, we remain confident in our ability to drive further market share gains given the strength of our proposition and improvements we have made to our offer. We have efficiency plans in place which will offset inflationary pressures in 2023, with the exception of energy costs which as previously indicated will be £10m higher than in 2022. We will issue our next trading update after Easter. David Wood, Chief Executive, commented: “This was a period in which we achieved record sales and made further market share gains. While profit declined, the outcome is still significantly ahead of the pre-Covid period. Our performance was underpinned by our balanced business model, digital leadership and ability to offer the best value and service across Trade, DIFM and DIY. This has been achieved due to the expertise and dedication of our 8,100 colleagues, and I would like to thank each of them for their support over the last 12 months. “Like all businesses we remain watchful of the external consumer environment. However, we have the right strategy and a compelling offer for customers, and look to the future with confidence. We will continue to invest across our distinctive growth levers, and are well-placed to achieve further market share gains.” Summary of full year financial results
*Adjusted measures represent results on an IFRS basis and exclude adjusting items which comprise significant restructurings, significant write downs or impairments of current and non-current assets, the costs of demerging and listing the business, the associated costs of separating the business from the Travis Perkins Group’s IT systems, the impact of unrealised fair value movements on derivatives through the profit and loss statement, VAT reclaim and the effect of changes in corporation tax rates on deferred tax balances. These measures have been explained, reconciled and calculated in note 5. Adjusted revenue excludes the £3.4m VAT reclaim. Investor & Analyst meeting A webcast for investors and analysts will be available today at 8.30am (UK time), followed by a live Q&A with the Wickes management team. The webcast can be accessed at: Wickes - Interim Results (brrmedia.co.uk) A recording of the webcast will be available on the Wickes Group plc website later today: https://wickesplc.co.uk Contacts Wickes Headland +44 (0) 0203 805 4822 Investor Relations PR Adviser to Wickes Andy Hughes +44 (0) 776 736 5360 Lucy Legh, Will Smith investorrelations@wickes.co.uk wickes@headlandconsultancy.com About Wickes Wickes is a digitally-led, service-enabled home improvement retailer, delivering choice, convenience, value and best-in-class service to customers across the United Kingdom making it well placed to outperform its growing markets. In response to gradual structural shifts in its markets over recent years, Wickes has a balanced business focusing on three key customer journeys - Local Trade, DIY (together "Core") and Do-it-for-me ("DIFM"). Wickes operates from its network of 230 right-sized stores, which support nationwide fulfilment from convenient locations throughout the United Kingdom, and through its digital channels including its website, TradePro mobile app for trade members, and Wickes DIY app. These digital channels allow customers to research and order an extended range of Wickes products and services, arrange virtual and in-person design consultations, and organise convenient home delivery or click-and-collect. Forward looking statements This announcement may include statements that are, or may be deemed to be, forward-looking statements. By their nature forward-looking statements involve opportunity, risk and uncertainty since they relate to future events and circumstances, and actual results may differ materially. Any forward-looking statements in this announcement reflect management's view with respect to future events as at the date of this announcement. Business review Wickes achieved record sales in 2022, benefitting from its market-leading value proposition and underpinned by its uniquely balanced business model. Despite lower market volumes we maintained our long track record of achieving market share gains in our Core business, with the acceleration in the growth rate of our TradePro customer base a particular feature. DIFM ordered sales recovered as the year progressed; delivered sales benefited from the unwind of the order book and came close to matching the level in 2019 on a like-for-like basis. Market 2022 proved to be a challenging year for the market, driven by well-documented challenges facing the consumer. The need to combat rising inflation has seen UK and global interest rates rise, and, as a result, house price inflation and transaction volumes are now starting to moderate. Despite this softer economic environment, which we expect to continue in 2023, UK home improvement remains a large and attractive market. The structural drivers remain intact, which will continue to support market growth over the medium term. These include behavioural changes brought about by the pandemic, the need to improve energy efficiency to reduce heating costs and emissions, and the age and composition of the UK housing stock. Importantly, at the same time it is worth noting that most homeowners either remain in work, choose not to be, or are retired. Our exposure to new build, which may be more cyclical, is very limited. We continue to believe that behavioural changes post Covid remain supportive. Many businesses have retained hybrid working practices, increasing time spent at home, fuelling further desire for homeowners and tenants to invest in their properties. While some DIY activities were brought forward into the early phases of the pandemic, some larger projects - involving our Local Trade and DIFM segments - may have been deferred. The growth of our TradePro customer base showed continued momentum and accelerated in 2022, reflecting strong order books across the trade and the increasing importance of value for money in an inflationary environment. More recently, the sharp rise in energy prices has seen increased focus on the energy efficiency of UK housing. Wickes is well-placed to help with the drive for energy efficiency through the products and services we sell, such as insulation, lighting and smart meters, and through the advice we offer. In 2022 we launched our interactive Sustainable House Guide, highlighting the measures that can be taken in each room of the house (or garden), with a click through to the relevant products. This complements our online Energy Saving advice guide, and our work with the Energy Saving Trust (EST) to verify the financial benefits from each product. The UK also has the oldest housing stock in northern Europe, with an average age of 65 years. One third were built before 1945. This is supportive in itself for structural growth in the RMI (Repair, Maintenance and Improvement) market, but ongoing government measures taken to improve energy efficiency are likely to require a multi-year investment in the UK housing stock. For example, it is estimated that around half of UK housing requires some form of investment to meet an EPC rating of C or better. Under current proposals, all UK homes will need to achieve this by 2030, and rental properties by 2025. Add in an element of likely population growth, and a trend towards more single person dwellings, and the outlook for the home improvement market remains bright. The homeowning demographic into which our Local Trade and DIFM end propositions face also leave us well placed to continue to take share, as do our credentials for value, quality and convenience. Although as yet we have seen little sign of trading down or rising own label participation, our surveys tell us that customers are becoming more discerning on price and are shopping around more. We believe that our value credentials, the strength of the Wickes brand, our simple and clear pricing policy, alongside our 10% flat rate discount to all TradePro members, stand us in good stead if market conditions become more challenging. Operational progress We are pleased to have made strong operational progress since demerger, reflected in continued growth in Core market share and a strong recovery in delivered DIFM sales. During the year, we demonstrated the flexibility of Wickes’ operating model, including a number of actions undertaken to respond to more challenging market conditions, and to drive further efficiencies within the business to offset increases in our cost base. Our balanced model gives us the agility to respond to changes in customer demand, leading to efficiencies across both store and distribution centre fulfilment costs. We have continued to invest in the customer proposition. We refitted another 12 stores in 2022, showcasing our full offer of kitchens and bathrooms, and taking the number in the new format to 162. We continue to see strong returns and sales uplifts in our refitted stores. Our store refresh programme also continues, with particular focus on the efficiency of multi-channel order pick and despatch, which drives selling densities and underpins our 30-minute click & collect promise. We have added Klarna to our online payment options, and continue to have a very competitive APR of 4.9% in our DIFM business despite rising base rates. All these initiatives are reflected in our customer satisfaction metrics, which have risen in all areas of the business (in-store, click & collect and home delivery). LFL sales across the Group were up 3.5% despite very tough comparatives in our Core business. Core LFL revenue declined by 2.0%, with the second half stronger as comparatives eased and as sales of energy-saving products helped our DIY category towards the end of the year. During the year we continued to prioritise our price leadership by working closely with our suppliers. We remained committed to managing supply chain inflation responsibly and our selling price inflation has been significantly less than our cost price inflation. The estimated level of selling price inflation for the full year was 13% (first half 15%, second half 10%), driven mainly by categories such as timber and cement. Inflationary pressures eased in the second half, with the timber price declining year on year, and we would expect this trend to continue into 2023. Despite the well documented industry shortages in certain categories in the first half, our strong supplier relationships, curated range and operational agility served us well to continue to provide customers with the products they need. Together with our price leadership and own brand credentials, we believe our strong focus on availability helped to drive increased revenues and awareness of Wickes, as reflected in our Core market share gains and the strong performance of TradePro, where both membership and sales increased by almost 20%. We entered FY 2022 with an elevated pipeline of DIFM orders due to the impact of Covid on the ability of our installation teams to deliver projects in the final quarter of 2021. Despite moderately lower orders over the course of the year, the successful work through of the order book resulted in LFL delivered sales increasing by 26.1%. Although there was some disruption in the first half relating to Covid and the supply of appliances, these issues faded as the year progressed. There was another strong performance in bathrooms, where new ranges in sanitaryware and accessories, and a wider range of pricing options, have helped to broaden our appeal. Refitted stores also continue to perform strongly in DIFM due to the welcoming nature of new showroom displays. We noted in our July trading update that DIFM orders had slowed in early summer, as customers were taking longer to commit to big ticket purchases. However, the pace of order decline moderated into Q4, and in the first 11 weeks of 2023 ordered sales are in line with the same period last year. At the end of 2022, the order book was below the prior year, although still ahead of pre-Covid levels. Given improvements in product availability and labour scheduling, we would expect the order book to return to more normal levels by the end of 2023. This will result in delivered sales being above ordered sales for the year, although this is expected to stabilise in 2024 and beyond. Winning for Trade Our TradePro membership scheme showed increasing momentum in the period. We enrolled 112,000 customers in the year, taking its total membership to 746,000 as we continued to grow the awareness and appeal of the scheme through its compelling proposition. Our local trade customers indicate that they are increasingly conscious of rising material costs and are switching to Wickes for its strong value credentials and simple discount scheme. We also believe the recent addition of 30 minute click-and-collect to our offering has increased the attraction of the scheme during a period where tradespeople are finding ways to most efficiently use their time whilst balancing full order books. We are encouraged that the TradePro members joining the platform during the year have adopted characteristics in line with previous cohorts using the platform. Sales from TradePro customers in the year increased by 19% compared to 2021. Our TradePro customers continue to represent strong strategic value to Wickes in terms of average order value and frequency of visit, and we have plans to evolve our offering in 2023 to drive further loyalty and engagement. To this end, we are encouraged that the results of our February Mood of the Nation survey showed that 45% of tradespeople have a pipeline of work for over three months. Although this is moderately down on the prior year, it remains healthy by historical standards. Accelerating DIFM Developing our digital expertise and continuous innovation of our product range continues to be a key focus within DIFM. During the year we completed the major refresh of our kitchen ranges initiated in Autumn 2021, introducing a number of new ranges and trending colourways during the period. Following the introduction of a completely new bathroom range during the second half of 2021, we continued to introduce new products to our showroom displays. We have also further improved our end-to-end bathroom service by driving greater engagement with our design consultants, supported by focused recruitment of installers with bathroom capabilities. Across kitchens and bathrooms our installer network continues to grow and now stands at 3,000 teams of independent contractors (March 2021: 2,600), enabling Wickes to continue to offer market-leading lead times whilst retaining a flexible approach to capacity. We continue to see encouraging attachment rates of tiling, flooring and joinery sales to kitchen and bathroom projects, confirming the opportunity to increase overall project spend within the home. DIY Category Wins As communicated in our July trading update, following the Jubilee weekend in June, we experienced signs of the DIY market softening from the very high levels of demand experienced during the pandemic. DIY sales continued to underperform Local Trade for most of the second half, although towards the end of the fourth quarter DIY sales started to recover with strong growth in sales of energy-related products such as insulation, smart meters, lighting and draught excluders. We have made it easier for customers to access these products with the launch of our Sustainable House Guide on our website, with advice on sustainable living and energy reduction for all rooms in the house with a click to purchase option for the most important products. In line with our strategy to capture share in underweight categories, we have grown market share in key segments such as garden and décor following recent range reviews. This has included the roll out of our new Crown colour emulsion paint range to support greater customer choice across different price points. The continued growth of our extended online range continues to support range depth whilst our curated range in store lends itself to high stock turn and limited exposure to highly seasonal lines and markdown activity across the wider sector. Within our ready-to-fit kitchen offer, we have launched six new ranges as part of a rebranding of this offer to Wickes Lifestyle Kitchens. This range is now offered with an online design option, which enables us to provide an excellent design service for projects with lower price points than our showroom ranges, thus allowing us to operate over a broader section of the market. Digital developments Despite the unwinding of Covid influences we have continued to grow the proportion of our digitally-enabled sales on a year-on-year basis. We completed a number of enhancements to our digital capabilities in the year, including greater use of push messaging, personalisation and targeted campaigns across our digital channels. Underpinned by our predictive Missions Motivation Engine, which is generating identifiable incremental sales, we have also stepped up the digital experience for our trade customers, increasing the levels of engagement throughout the project journey. Increased use of social campaigns and display marketing has also grown the awareness of the TradePro mobile app. We launched our Wickes eBay store during the year with 4,000 lines, extending our customer reach to a younger audience. We are currently looking at opportunities with marketplace platforms, including eBay, to extend our range accessibility to a wider audience of home improvers. We also now offer Klarna as an online payment solution. Our digital marketing campaigns have been recognised across the industry with Wickes receiving a number of prestigious awards. At the recent Marketing Week Awards Wickes claimed the coveted Grand Prix award, a large part of which was based on the success of the Mission Motivation Engine. Wickes also received the awards for Retail and Ecommerce and Best Use of Segmentation, making it the most decorated brand at the 2022 awards. Growing our estate of new format stores 12 store refits were completed during the year, including the downsize and refit of our Maidstone store. In addition to a new format showroom, our refitted stores also benefit from an improved order fulfilment layout which increases our home delivery capacity. Despite the impact of heightened build costs during the year, store investments continue to deliver sales uplifts of 25% and ROCE of over 25%. Sales increases by category are very consistent, with over 50% uplift in DIFM sales and around 10% in Core. We will continue our refit programme in 2023, where possible tied to lease renewals. Our property team is continuing to review and stress test a number of white space catchments and we remain confident on the opportunity to expand into 20 new locations over the next five years. Our first new store for some time opened in Bolton in October, and further openings are planned in 2023. IT separation Following initial mobilisation during the previous financial year, 2022 saw good progress with the transition of technology and processes from our pr |